Economics of Market Socialism and the Issue of Public Enterprise Reform in Developing Countries (The Distinguishedl Lecture)

Pranab Bardhan


Historically state socialism has had dramatic initial success
in creating a basic capital goods base in early stages of
industrialisation and in its spectacular feats of mass literacy and
public health campaigns made possible by mass-based organisations and
forces of human mobilisation unleashed by socialist revolutions in poor
countries like China, Vietnam or Cuba. But from the post-mortem reports
of the collapse of the command economy in different parts of the world
it is now clear that centralised state socialism is largely incapable of
coping with the technological demands of the increasing sophistication
in product quality and diversity and the needs of quick flexibility in
decision-making and risk-taking in a whole range of economic activities
spanning the technological spectrum from agriculture to semiconductors.
There is no doubt that a more decentralised market-mediated allocation
of resources and greater competition can correct much of the wastage and
dynamic efficiency of the bureaucratic command system and introduce more
agility and flexibility in economic decisions. But the big question is
how effective the stimulus of competition and markets can be without
large-scale private ownership.

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